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Personal tax

On 13 May 2014, the Treasurer, the Hon Joe Hockey MP delivered the Coalition’s first Budget. The Deloitte view and analysis on the Budget announcements and the implications for business will be published in the 2014-15 Deloitte Budget Brief on 14 May 2014.

Welcome to the politics of Budget repair. Australia has just seen the toughest Federal Budget since 1997, with spending cut and taxes raised to generate policy savings on a scale not seen for the better part of two decades. As expected, from a business taxation perspective, the Treasurer has continued to reposition existing tax policies with no major surprises or changes. The more important focus for business will be the White Paper on the Reform of Australia's Tax System, which will provide a longer term considered approach to tax reform and which is due prior to the next election.

The 2014-15 Deloitte Budget webinar will be held at 9am on 14 May 2014. Registration is available here.

If you have any questions regarding the items below or any other business tax matter, please contact our team listed in the top right hand column.

Temporary Budget Repair Levy

 

The pre-Budget rumours around a temporary deficit levy are set to become a reality for individuals on the top marginal rate. From 1 July 2014 until 30 June 2017, what will formally be known as the Temporary Budget Repair Levy (TBRL), will be payable by individuals whose taxable income exceeds $180,000 at a rate of 2% on the excess over $180,000.

What impact will this have on income tax rates for resident individuals?

The TBRL is effectively a two percentage point increase in the top marginal rate. An indication of the additional tax payable under the TBRL is summarised in the following table.

Taxable income Additional tax
180,000 Nil
200,000 400
250,000 1,400
300,000 2,400
350,000 3,400
400,000 4,400

 

As a legacy from the previous Labor Government, the tax-free threshold will increase from $18,200 to $19,400 from 1 July 2015. As a result, and including the TBRL but excluding the Medicare levy, the personal income tax rates for the 2014-15 and 2015-16 and later years are as follows:

2014-15 2015-16 and later years
Income range Rate % Income range Rate %
0 - 18,200 0 0 - 19,400 0
18,201 - 37,000 19 19,401 - 37,000 19
37,001 - 80,000 32.5 37,001 - 80,000 33
80,001 - 180,000 37 80,001 - 180,000 37
180,001 + 47 180,001 + 47

Including the TBRL, but excluding the Medicare levy

Taking into consideration that the Medicare levy will increase from 1.5% to 2% from 1 July 2014, the top marginal rate plus the TBRL and the Medicare levy will be 49% for resident individuals.

What impact will this have on income tax rates for non-resident individuals?

2014-15 2015-16 and later years
Income range Rate % Income range Rate %
0 – 80,000 32.5 0 – 80,000 33
80,001 - 180,000 37 80,001 - 180,000 37
180,001 + 47 180,001 + 47

 

The top marginal rate is effectively increased to 47% with the introduction of TBRL at two percentage points on taxable incomes exceeding $180,000.

 

 

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